2006 (2) TMI 601 - HC - VAT and Sales Tax

Court rules in favor of iron and steel firm in assessment order revision case under TNGST Act

Coromandal Steel Products Versus Deputy Commercial Tax Officer, Harbour v. Assessment Circle, Chennai and another

The court found in favor of the petitioner, a partnership firm in the iron and steel industry, in a case concerning the revision of an assessment order ... - Issues Involved:1. Legality of the revision of the assessment order and disallowance of exemption.2. Justifiability of the levy of penalty under Section 16(2) of the TNGST Act.Detailed Analysis:1. Legality of the Revision of the Assessment Order and Disallowance of Exemption:The petitioner, a partnership firm dealing in iron and steel, was assessed under the Tamil Nadu General Sales Tax Act, 1959 (TNGST Act) and the Central Sales Tax Act, 1956 (CST Act). For the assessment year 1989-90, the petitioner reported a total turnover of Rs. 5,60,573 and claimed exemption under Section 6-A of the CST Act, citing consignment transfer of goods to agents outside the State. Initially, the assessing authority accepted this claim and granted exemption in the assessment order dated July 13, 1990. However, this order was revised on July 10, 1991, disallowing the exemption on the grounds that the petitioner received sale proceeds before the sale of goods by the agent, thus treating it as a direct inter-State sale.The petitioner contended that the consignment transfer was supported by statutory declarations and other relevant documents, and the receipt of advance payment did not alter the nature of the transaction. The court agreed with the petitioner, stating that the original assessment order granting exemption based on documentary evidence was justified and that the revision lacked legal basis or justification. Consequently, the imposition of tax at the rate of eight per cent on the turnover of Rs. 5,60,572.50 was deemed incorrect and set aside.2. Justifiability of the Levy of Penalty under Section 16(2) of the TNGST Act:The petitioner argued that the levy of penalty under Section 16(2) of the TNGST Act requires wilful and deliberate suppression or omission of turnover, which was not the case here. The petitioner had disclosed the total turnover in their monthly returns, and the exemption was initially granted based on the documents provided. The court noted that the revision of assessment was not for escaped turnover but for reassessment of the exempted turnover, which does not fall under Section 12(2) of the Act.Citing the case of Deputy Commissioner of Commercial Taxes, Trichy v. V. R. Kuppusamy Gounder and Sons [1995] 98 STC 408, the court emphasized that mere disallowance of exemption does not constitute suppression of turnover. Therefore, the levy of penalty was not justified. The court concluded that the petitioner had not committed wilful or deliberate suppression or omission of turnover, and the penalty under Section 16(2) was set aside.Conclusion:The impugned order dated July 28, 2000, was quashed, and the original assessment order dated July 13, 1990, was restored. The writ petition was allowed, and no costs were imposed.